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Canada’s Inflation Pressures Continues To Widen

The annual inflation rate in Canada remains at 4.7% in November. Analysts point out that inflation pressure continues to broaden; that combined with a stronger labour market will prompt a rate hike from the Bank of Canada during the second quarter of next year.

Canada’s headline inflation rate was unchanged in November, at 4.7% year over year. Energy price growth inched higher again, backed by still elevated gasoline prices, which were 43.6% above levels in November 2020 and accounted for just under a quarter of the headline inflation rate. Growth in food prices also strengthened, to 4.4% or the highest since 2015.

Excluding food and energy products, CPI ticked slightly lower to 3.1% from year ago in November, or 2.7% on an annualized seasonally adjusted basis relative to the pre-shock February 2020 level.

Further disruptions to supply chains and energy markets from Omicron and the BC flood later in November are expected to add to price uncertainties in the near-term. But very firm demand growth means inflation rates will likely remain above pre-pandemic levels over the next year.

With labour markets also growing increasingly tight, we expect the bank of Canada to start hiking rates around the second quarter of 2022.

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